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Federal Laws Governing Mortgage Lending
The United States Congress passed 4 basic laws to provide lender guidelines. Lenders are required to follow these rules, regulations and procedures when providing loan documents.
Real Estate Settlement Procedures Act (RESPA)
The Real Estate Settlement Procedures Act (RESPA) requires lenders to give a "Good Faith Estimate" of all closing costs you are likely to pay within 3 days of receiving your application. The purpose is to help the borrower avoid paying "hidden" fees at closing, to allow the borrower to shop for a better loan before signing.
Read RESPA law
Truth In Lending Act (TILA)
The Truth In Lending Act (TILA) specified in Regulation Z, requires that the annual percentage rate (APR), the terms of the loan and the total costs be disclosed to a borrower at the beginning. This information is required to be conspicuous on documents given to the consumer before signing, and usually on billing statements.Read TILA law
Equal Credit Opportunity Act (ECOA)
The Equal Credit Opportunity Act (ECOA) prohibits discrimination in lending based on race, creed, religion, national origin, sex, marital status or age. It guarantees that all consumers are given an equal chance to obtain credit despite those factors. Other factors can affect credit evaluations, such as income, expenses, debt, and credit history.
Fair Credit Reporting Act (FCRA)
The Fair Credit Reporting Act (FCRA) regulates the accuracy, fairness and privacy of information in the files of consumer reporting agencies. When you apply for a mortgage, the lender gets your credit report. The FCRA provides you access to that report.Read FCRA law
More United States Government Online Resources
Fair Housing and Equal Opportunity (FHEO)
FTC - Mortgage Servicers: Their Responsibilities to You
FAQs About Escrow Accounts for Consumers
How to Avoid Foreclosure (HUD)
Guide to Avoiding Foreclosure
FTC - Mortgages/Real Estate
HOPE for Homeowners
HUD Approved Housing Counseling Agencies
List of Credit Counseling Agencies Approved
Remedies1) Loan Modification: Many Borrowers give the Violation List to Loan Modifiers to get the Lender to Reform the Loan with better terms. If the Lender refuses, the Borrower may choose to hire a lawyer and go to court. Once a Loan is Modified, the Borrower can no longer sue.
2) 3 Year TILA Rescission: Some TILA violations can allow rescission for 3 years, with harsh penalties to the Lender. An APR that is grossly inaccurate, Finance Charges that are undisclosed, an inaccurate Notice of Right to Cancel, or failure to supply 2 copies of the Notice of Right to Cancel to each Borrower on Refinance are all grounds for Rescission.
3) 1 Year TILA Suit: Other TILA violations can be grounds for suit for 1 year after documents are signed.
4) State Rescission: Misrepresentation, Fraud, lack of Consideration can be reasons for Rescission in many States, based on State Laws.
5) Lawsuits: Any substantial violations can be ground to sue the Lender.
Borrowers should consult an attorney, to see which remedy is best.
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